The Reserve Bank of India (RBI) on Thursday announced a 50 basis points (bps) cut in the repo rate, bringing it down to 5.5 per cent. This marks the third consecutive rate cut of the year, totaling 100 bps since February 2025. RBI Governor Sanjay Malhotra outlined key decisions from the three-day Monetary Policy Committee (MPC) meeting that began on June 4 and concluded today.
Here are the five key highlights from the announcement:
1. Repo rate cut by 50 bps
RBI reduced the repo rate under the liquidity adjustment facility (LAF) from 6.0 per cent to 5.5 per cent. The Standing Deposit Facility (SDF) rate now stands at 5.25 per cent, while the Marginal Standing Facility (MSF) rate and the Bank Rate are set at 5.75 per cent.
“The policy repo rate under the liquidity adjustment facility [is reduced] by 50 basis points to 5.5%. This is the immediate effect. Consequently, the standing deposit facility rate, which is the STF rate, shall stand adjusted to 5.25% and the marginal standing facility MSF rate and the bank rate shall stand adjusted to 5.75%,” said RBI Governor Sanjay Malhotra during the policy address.
This move is aimed at easing borrowing costs and supporting economic growth, amid signs of moderating inflation.
2. MPC changes stance to neutral from accommodative
With cumulative rate cuts amounting to 100 bps since February, the six-member MPC has decided to shift its monetary policy stance to “neutral” from “accommodative”.
“From here onwards, the MPC will be carefully assessing the incoming data and the evolving outlook to chart out the future course of monetary policy in order to strike the right growth-inflation balance. The fast-changing global economic situation necessitates continuous monitoring and assessment of the evolving macroeconomic outlook,” said Governor Malhotra.
The neutral stance indicates a more balanced approach, signalling that further easing or tightening will depend on economic data.
3. CRR cut to inject liquidity
To provide durable liquidity support, the RBI announced a 100 bps reduction in the Cash Reserve Ratio (CRR), from 4 per cent to 3 per cent of net demand and time liabilities (NDTL).
This reduction will be implemented in four equal tranches of 25 bps each, beginning from the fortnights starting September 6, October 4, November 1, and November 29.
The phased CRR cut is expected to release about Rs 2.5 lakh crore of primary liquidity into the banking system by the end of November 2025.
4. Inflation forecast revised lower
Reflecting easing food and core inflation trends, the RBI revised its inflation outlook for FY26 to 3.7 per cent, below its 4 per cent comfort zone. Retail inflation had already declined to 3.16 per cent in April.
“Food inflation outlook remains soft, core inflation outlook to remain benign,” said Malhotra, indicating a more stable price environment ahead.
5. GDP growth projection at 6.5 per cent
For the financial year 2025–26, the Reserve Bank of India has projected real GDP growth at 6.5 per cent. On a quarterly basis, growth is expected to be 6.5 per cent in the first quarter (April–June), 6.7 per cent in the second quarter (July–September), 6.6 per cent in the third quarter (October–December), and 6.3 per cent in the fourth quarter (January–March).